SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 5, 1999
----------------
B&G Foods, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 333-39813 13-3916496
---------------- ---------------- --------------
(State or Other (Commission File (IRS Employer
Jurisdiction of Number) Identification
Incorporation No.)
426 Eagle Rock Avenue, Roseland, New Jersey 07068
------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (973) 228-2500
--------------
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2 Acquisition or Disposition of Assets (Dollars in Thousands)
----------------------------------------------------------------------
B&G Foods, Inc. (the "Company") is filing this Form 8-K/A to file
certain financial statements and pro forma financial information relating to (i)
the acquisition by Roseland Distribution Company, a wholly-owned subsidiary of
the Company, of the business, assets and operations of International Home Foods,
Inc. relating to the Polaner brand, the Maxams brand, the Eagle Rock Farms brand
and assorted products, including associated private label products (the "Polaner
Brands Acquisition"); and (ii) the acquisition by Heritage Acquisition Corp., a
wholly-owned subsidiary of the Company, of the assets of certain brands from The
Pillsbury Company, a Delaware corporation, Indivined B.V., a company
incorporated under the laws of the Netherland, and IC Acquisition Company, a
Delaware corporation and an indirect wholly owned subsidiary of Pillsbury,
including Underwood meat spreads, B&M baked beans, Ac'cent flavor enhancer,
Sa-son Ac'cent flavor enhancer, Las Palmas Mexican sauces and food products and
Joan of Arc dry bean products businesses (the "Heritage Brands Acquisition").
The purchase price for the Polaner Brands Acquisition was approximately
$30,500,000 cash, including transaction costs. Financing for this acquisition
and certain related transaction fees and expenses was provided by borrowings
from the Company's Credit Facility.
The purchase price for the Heritage Brands Acquisition was
approximately $195,374,000 including transaction costs. In connection with this
transaction, the Company entered into a $280,000,000 senior secured credit
facility comprised of a $60,000,000 five-year revolving credit facility, a
$70,000,000 five-year term loan facility ("Term Loan A") and a $150,000,000
seven-year term loan facility (Term Loan B" and collectively with Term Loan A,
the "Term Loan Facilities"). The proceeds of the Term Loan Facilities, together
with an additional $35,000,000 of equity from Bruckman, Rosser, Sherrill and
Co., L.P. ("BRS"), were used to fund the Heritage Acquisition and refinance
borrowings under the Company's Credit Facility which had been used for the
Polaner Brands Acquisition and the earlier acquisition of Maple Grove Farms on
July 17, 1998.
The closing of the Polaner Brands Acquisition occurred on February 5,
1999 and the closing of the Heritage Brands Acquisition occurred on March 15,
1999. The Company filed an 8-K reporting the Polaner Brands Acquisition on
February 20, 1999 and filed an 8-K reporting the Heritage Brands Acquisition on
March 31, 1999. As stated in each of the foregoing 8-Ks, the Company undertook
to file within the period required by the Securities Exchange Act of 1934, as
amended, the financial statements and pro forma financial statements of each of
the businesses so acquired. The Company is filing such financial statements and
pro forma information with this report.
Item 7 Financial Statements, Pro Forma Financial Statements and Exhibits
-----------------------------------------------------------------------
(a) Financial Statements
1. Combined Statements of Assets Expected to be Sold of the
Pillsbury Brands Business as of December 31, 1998 (unaudited) and
September 30, 1998 and 1997, and Combined Statements of Direct
Revenues and Direct Expenses for the three-month
2
<PAGE>
periods ended December 31, 1998 and 1997 (unaudited), and years
ended September 30, 1998, 1997 and 1996.
2. Combined Statements of the Net Assets Acquired of the Polaner
Brands Business as of December 31, 1998 and 1997, and Combined
Statements of Direct Revenues and Direct Expenses for the years
ended December 31, 1998, 1997 and 1996.
(b) Pro Forma Financial Information
1. Pro Forma Combined Balance Sheet (Unaudited) as of January 2,
1999, and Pro Forma Combined Statement of Operations (Unaudited)
for the year ended January 2, 1999.
(c) Exhibits None
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
B&G FOODS, INC.
Date: April __, 1999 By:
--------------------------------------
Name: Robert C. Cantwell
Title: Executive Vice President
of Finance and Chief Financial
Officer
4
<PAGE>
EXHIBITS INDEX
Exhibit
Number Description
- ------- -----------
(c) Exhibits none
5
<PAGE>
Independent Auditors' Report
The Board of Directors
The Pillsbury Company:
We have audited the accompanying combined statements of assets expected to be
sold as of September 30, 1998 and 1997, and the related combined statements of
direct revenues and direct expenses for each of the years in the three-year
period ended September 30, 1998 of B&M Baked Beans, Underwood Meat Spreads,
Ac'cent and Sason Flavor Enhancers, Joan of Arc Canned Beans, and Las Palmas
Ethnic Mexican Food (collectively, the "Pillsbury Brands Business"). These
combined financial statements are the responsibility of The Pillsbury Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements were prepared to present the assets
expected to be sold and the direct revenues and direct expenses of the Pillsbury
Brands Business pursuant to the Asset and Stock Purchase Agreement (the
"Agreement") between The Pillsbury Company, Indivined B.V., IC Acquisition
Company (the "Sellers" and "Pillsbury"), and Heritage Acquisition Company (the
"Buyer") as described in note 1, and are not intended to be a complete
presentation of the Pillsbury Brands Business' financial position, results of
operations, or cash flows.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined assets expected to be sold of the
Pillsbury Brands Business as of September 30, 1998 and 1997, and the Pillsbury
Brands Business' combined direct revenues and direct expenses for the
three-years ended September 30, 1998, pursuant to the purchase agreement
referred to in note 1, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 9, 1999
6
<PAGE>
THE PILLSBURY BRANDS BUSINESS
(Certain Product Lines of the Pillsbury Company)
Combined Statements of Assets Expected to be Sold
September 30, 1998 and 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Dec. 31, Sept. 30, Sept. 30,
Assets 1998 1998 1997
-------------- ------------- ------------
(unaudited)
Inventories $ 19,599 17,764 19,301
Property, plant, and equipment (net) 10,720 10,584 10,715
-------------- ------------- ------------
Total assets expected to be sold $ 30,319 28,348 30,016
============== ============= ============
See accompanying notes to combined financial statements.
</TABLE>
7
<PAGE>
THE PILLSBURY BRANDS BUSINESS
(Certain Product Lines of the Pillsbury Company)
Combined Statements of Direct Revenues of Direct Expenses
Year Ended September 30, 1998, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Ended Year ended Year ended
3 Months ended 3 Months ended Sept. 30 Sept. 30 Sept. 30
Dec. 31, 1998 Dec. 31, 1997 1998 1997 1996
----------------- ---------------- ------------ ------------- ------------
(unaudited) (unaudited)
Direct revenue, net $ 30,333 31,668 135,568 144,635 153,266
Cost of products sold:
Product costs 13,401 13,802 59,088 64,595 65,886
Distribution costs 2,043 2,242 9,164 10,913 11,962
---------------- --------------- ------------ ------------- ------------
Total costs of products sold 15,444 16,044 8,252 75,508 77,848
Gross margin 14,889 15,624 67,316 69,127 75,418
Direct marketing:
Advertising and consumer promotions 1,187 831 5,079 6,578 10,976
Trade promotions 3,042 4,305 18,985 17,883 20,570
---------------- --------------- ------------- ------------ -----------
Total direct marketing expenses 4,229 5,136 24,064 24,461 31,546
Direct selling, administrative, and other 1,951 1,991 8,726 8,644 8,939
---------------- --------------- ------------ ------------ ------------
Excess of direct revenue over direct expenses $ 8,709 8,497 34,526 36,022 34,933
================ ================ ============ ============ ============
See accompanying notes to combined financial statements.
</TABLE>
8
<PAGE>
THE PILLSBURY BRANDS BUSINESS
(Certain Product Lines of the Pillsbury Company)
Notes to Combined Financial Statements
September 30, 1998 and 1997
(Dollars in Thousands)
(1) Basis of Presentation
On January 28, 1999, Heritage Acquisition Company (the "Buyer") entered
into an Asset and Stock Purchase Agreement (the "Agreement") with The
Pillsbury Company, Indivined B.V., and IC Acquisition Company ( the
"Sellers" and "Pillsbury"). The agreement provides for the sale of
certain assets and assumption of certain liabilities of Pillsbury,
pertaining to six of its product lines: B&M Baked Beans ("B&M"),
Underwood Meat Spreads ("Underwood"), Ac'cent and Sason Flavor
Enhancers (collectively, "Ac'cent"), Joan of Arc Canned Beans ("Joan of
Arc"), and Las Palmas Ethnic Mexican Food ("Las Palmas"), collectively
known as the "Pillsbury Brands Business." The Pillsbury Brands Business
was operated as parts of the Pillsbury North America Division, Food
Service Division, and the International Division of Pillsbury.
Approximately 81% of the Pillsbury Brands Business sales for the year
ended September 30, 1998 are to retailers, with the remaining 10% and
9% of sales to foodservice and international customers, respectively.
The accompanying statements present the combined assets expected to be
sold as of September 30, 1998 and 1997 and direct revenue, cost of
products sold, direct marketing expenses, and direct selling,
administrative, and other expenses for the years ended September 30,
1998, 1997, and 1996 for the Pillsbury Brands Business. The sale is
expected to be consummated in February 1999.
Pillsbury does not account for the Pillsbury Brands Business as a
separate entity. Accordingly, the information included in the
accompanying combined financial statements has been obtained from
Pillsbury's consolidated financial records. The combined statements of
assets expected to be sold and direct revenue and direct expenses
include allocations as discussed in note 2. Pillsbury's management
believes that the allocations are reasonable; however, these allocated
expenses are not necessarily indicative of costs that would have been
incurred by the Pillsbury Brands Business on a stand-alone basis, since
certain other selling, administrative, and other expenses are provided
to the Pillsbury Brands Business that are not included in the
accompanying statements as discussed in note 2. Tax expense has not
been included in the combined statements of direct revenue and direct
expenses, as this expense is not specifically identifiable to the
Pillsbury Brands Business.
The combined statements of direct revenues and direct expenses include
allocations of certain plant costs, as discussed in note 2. Pillsbury's
management believes these allocations are reasonable; however, these
allocated costs may not be indicative of costs that would have been
incurred by the Pillsbury Brands Business on a stand-alone basis, since
these allocated costs are based on the structure of certain plant
operations and related activities, as managed and operated by
Pillsbury.
Total costs of products sold include $9,853, $7,254, and $7,697 in
allocated fixed overhead costs for the years ended September 30, 1998,
1997, and 1996, respectively. Direct selling, administrative, and other
expenses include $5,840, $5,394, and $5,025 of allocated costs for the
years ended September 30, 1998, 1997, and 1996, respectively.
In addition, manufacturing and distribution of Underwood and Ac'cent
are conducted where other Pillsbury manufacturing and distribution
operations, not included in the Pillsbury Brands Business, are present.
At this shared site, only the assets of Underwood and Ac'cent
(inventories, machinery, and equipment acquired) are included in the
combined statements of assets expected to be sold.
9
<PAGE>
THE PILLSBURY BRANDS BUSINESS
(Certain Product Lines of the Pillsbury Company)
Notes to Combined Financial Statements
September 30, 1998 and 1997
(Dollars in Thousands)
Under the Company's centralized cash management system, cash
requirements of the Pillsbury Brands Business are generally provided
directly by Pillsbury, and cash generated by the Pillsbury Brands
Business is generally remitted directly to Pillsbury. Transaction
systems (e.g., payroll, employee benefits, accounts receivable,
accounts payable) used to record and account for cash transactions are
provided by centralized company organizations outside the defined scope
of the Pillsbury Brands Business. Most of the corporate systems are not
designed to track assets/liabilities and receipt/payments on a product
specific basis. Given these constraints, and the fact that only certain
assets of the Pillsbury Brands Business are expected to be sold,
statements of financial position and cash flows could not be prepared.
(2) Summary of Significant Accounting Policies
Revenue Recognition
Revenue from the sale of products is recognized at the time
the products are shipped. Direct revenue represents gross
sales less discounts, unsaleables, and other deductions.
Use of Estimates
The preparation of combined financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
disclosures. Actual results could differ from these estimates.
Also as discussed in note 1, these financial statements
include allocations and estimates that are not necessarily
indicative of the costs and expenses that would have resulted
if the Pillsbury Brands Business had been operated as a
separate entity, or the future results of the Pillsbury Brands
Business.
Inventories
Finished goods inventories are directly attributable to the
Pillsbury Brands Business. Raw materials related to the
Underwood, Ac'cent, and Joan of Arc product lines have been
allocated to the Pillsbury Brands Business on the basis of
usage during the preceding year. Inventories are priced at the
lower of cost, determined by the first-in, first-out method,
or market. Certain distribution costs have been included in
finished goods based on the preceding year actual distribution
percentage of production.
Property, Plant, and Equipment
Property, plant, and equipment is stated at historical cost,
net of accumulated depreciation directly related to the fixed
assets. Alterations and major overhauls which extend the lives
or increase the capacity of the assets are capitalized.
Ordinary repairs and maintenance are charged to operating
costs. Depreciation is computed using the straight-line method
over the estimated useful lives within the following range:
Buildings 25-40 years
Machinery and equipment 7-10 years
Furniture and fixtures 5-7 years
Vehicles 3-5 years
10
<PAGE>
THE PILLSBURY BRANDS BUSINESS
(Certain Product Lines of the Pillsbury Company)
Notes to Combined Financial Statements
September 30, 1998 and 1997
(Dollars in Thousands)
Cost of Products Sold
Cost of products sold includes direct costs of materials,
labor, and overhead. Overhead allocations are based on
estimated time spent by employees, relative use of facilities,
and other related costs.
Certain other corporate overhead functions are provided to the
Pillsbury Brands Business by Pillsbury and are not directly
attributable or specifically identifiable to the Pillsbury
Brands Business and, therefore, have been excluded from
product costs in the accompanying statements. These expenses
primarily include Pillsbury's corporate related expenses such
as engineering and safety, and corporate production expenses.
Direct Marketing
Direct marketing represents specifically identified
promotional, advertising, and other marketing expenses. Also
included in direct marketing is trade promotion expense, which
represents promotional incentives offered to retailers.
Direct Selling, Administrative, and Other
Direct selling, administrative, and other direct expenses are
specifically identifiable, and others are allocated to the
Pillsbury Brands Business based on an estimate of sales of the
Pillsbury Brands Business compared to the total sales of the
Pillsbury division in which the product is included. Such
allocated expenses represent those charges that are
attributable to the Pillsbury Brands Business, and include
Pillsbury's related expenses such as human resources, finance,
market research, selling, and other general and administrative
expenses. Certain other selling, administrative, and other
expenses that are provided to the Pillsbury Brands Business by
Pillsbury are not directly attributable or specifically
identifiable to the Pillsbury Brands Business and, therefore,
have been excluded from direct selling, administrative, and
other expense in the accompanying statements. These expenses
primarily include Pillsbury's corporate related expenses such
as executive compensation, central management systems, and
strategy, and general corporate expenses.
(3) Inventories
Inventories consist of the following:
1998 1997
---------- -----------
Raw materials $ 2,963 3,484
Finished goods 14,801 15,817
---------- -----------
$ 17,764 19,301
========== ===========
11
<PAGE>
THE PILLSBURY BRANDS BUSINESS
(Certain Product Lines of the Pillsbury Company)
Notes to Combined Financial Statements
September 30, 1998 and 1997
(Dollars in Thousands)
Raw materials include $887 and $899 of spare parts at September 30,
1998 and 1997, respectively. Raw materials which have been allocated
based on usage during the preceding year for the Underwood, Ac'cent,
and Joan of Arc product lines are $1,705 and $2,210 at September 30,
1998 and 1997, respectively.
Finished goods include $707 and $1,138 of allocated distribution costs
at September 30, 1998 and 1997, respectively.
(4) Property, Plant, and Equipment
The components of property, plant, and equipment are as follows:
1998 1997
----------- ------------
Land and building $ 5,061 4,495
Machinery and equipment 8,503 8,197
Vehicles 5 5
Furniture and fixtures 77 77
CIP 663 520
----------- ------------
14,309 13,294
Less accumulated depreciation (3,725) (2,579)
----------- ------------
Net fixed assets $ 10,584 10,715
=========== ============
(5) Commitments and Contingencies
From time to time, the Pillsbury Brands Business may be subjected to
certain lawsuits and claims, and other actions arising in the normal
course of business. Such lawsuits and claims, as defined in the
Agreement, are the responsibility of Pillsbury.
Joan of Arc and Las Palmas are manufactured by third parties, and in
each instance, Heritage Acquisition Company will assume Pillsbury's
co-packing agreements with these third parties, with varying terms.
12
<PAGE>
Independent Auditors' Report
The Board of Directors
B&G Foods, Inc.:
We have audited the accompanying combined statements of net assets acquired as
of December 31, 1998 and 1997, and the related combined statements of direct
revenues and direct expenses for each of the years in the three-year period
ended December 31, 1998 of Polaner and related brands (collectively, the Polaner
Brands Business). These combined financial statements are the responsibility of
B&G Foods, Inc.'s management. Our responsibility is to express an opinion on
these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements were prepared to present the net assets
acquired and the direct revenues and direct expenses of the Polaner Brands
Business pursuant to the Asset Purchase Agreement (the Agreement) between
Roseland Distribution Company (a subsidiary of B&G Foods, Inc.) and
International Home Foods, Inc. and M. Polaner, Inc. as described in note 1, and
are not intended to be a complete presentation of the Polaner Brands Business'
financial position, results of operations, or cash flows.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined net assets acquired of the
Polaner Brands Business as of December 31, 1998 and 1997, and the Polaner Brands
Business' combined direct revenues and direct expenses for each of the years in
the three-year period ended December 31, 1998, pursuant to the Agreement, in
conformity with generally accepted accounting principles.
KPMG LLP
Short Hills, New Jersey
April 16, 1999
13
<PAGE>
THE PILLSBURY BRANDS BUSINESS
(Certain Product Lines of the International Home Foods, Inc.)
Combined Statements of Net Assets Acquired
September 30, 1998 and 1997
(Dollars in Thousands)
Assets 1998 1997
---------- -----------
Inventories $ 10,626 10,807
Machinery and equipment (net) 4,633 4,992
Coupon liability (33) (1,202)
----------- ------------
$ 15,226 14,597
=========== ============
See accompanying notes to combined financial statements.
14
<PAGE>
THE PILLSBURY BRANDS BUSINESS
(Certain Product Lines of the International Home Foods, Inc.)
Combined Statements of Direct Revenues and Direct Expenses
Years ended December 31, 1998, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
---------------- -------------- -------------
Direct revenue, net $ 50,162 60,839 69,672
Cost of goods sold 31,121 38,212 41,873
---------------- ---------------- -------------
Gross profit 19,041 22,627 27,799
Direct sales, marketing and distribution expenses 15,700 21,692 27,203
Direct general and administrative expenses 911 1,018 1,427
---------------- ---------------- -------------
Excess (deficiency) of direct revenue
over (under) direct expenses $ 2,430 (83) (831)
================ ================ =============
See accompanying notes to combined financial statements.
</TABLE>
15
<PAGE>
THE POLANER BRANDS BUSINESS
(Certain Product Lines of International Home Foods, Inc.)
Notes to Combined Financial Statements
December 31, 1998 and 1997
(Dollars in Thousands)
(1) Basis of Presentation
On January 12, 1999, Roseland Distribution Company, a subsidiary of B&G
Foods, Inc. (the Buyer, or B&G) entered into an Asset Purchase
Agreement (the Agreement) with International Home Foods, Inc. (IHF) and
its subsidiary M. Polaner, Inc. (collectively, the Seller). The
Agreement provides for the sale of certain assets and assumption of the
coupon liability of the Seller, pertaining to certain product lines:
the Polaner brand, the Maxams brand, the Eagle Rock Farms brand, and
all associated products (collectively, the Polaner Brands Business).
The Polaner Brands Business was operated as part of IHF. The
accompanying financial statements present the combined net assets
acquired as of December 31, 1998 and 1997 and the direct revenue and
direct expenses for the years ended December 31, 1998, 1997, and 1996
for the Polaner Brands Business.
The acquisition was consummated on February 5, 1999.
The Seller does not account for the Polaner Brands Business as a
separate entity. Accordingly, the information included in the
accompanying combined financial statements has been obtained from the
Seller's consolidated financial records. The combined statements of net
assets acquired and direct revenue and direct expenses include
allocations as discussed in note 2. These allocated expenses are not
necessarily indicative of costs that would have been incurred by the
Polaner Brands Business on a stand-alone basis. Tax expense (benefit)
has not been included in the combined statements of direct revenue and
direct expenses, as this expense (benefit) is not specifically
identifiable to the Polaner Brands Business.
As further described in note 2, direct sales, marketing and
distribution expenses include $1,106, $1,329 and $1,895 in allocated
costs for the years ended December 31, 1998, 1997, and 1996,
respectively. Direct general and administrative expenses include $911,
$1,018, and $1,427 of allocated costs for the years ended December 31,
1998, 1997, and 1996, respectively.
Under the Seller's centralized cash management system, cash
requirements of the Polaner Brands Business are generally provided by
IHF, and cash generated by the Polaner Brands Business is generally
remitted to IHF. Transaction systems (e.g., payroll, employee benefits,
accounts receivable, accounts payable) used to record and account for
cash transactions are provided by service support organizations of the
Seller outside the defined scope of the Polaner Brands Business. Most
of the corporate systems are not designed to track assets/liabilities
and receipt/payments on a product specific basis. Given these
constraints, and the fact that only certain assets of the Polaner
Brands Business were sold, combined statements of financial position
and cash flows could not be prepared.
During 1998, 1997 and 1996, B&G had two copacking contracts with IHF
pursuant to which B&G manufactured for IHF the Polaner lines of fruit
spreads, preserves and wet spices. In addition, B&G had a third
contract with IHF under which it distributed the Polaner lines of
16
<PAGE>
THE POLANER BRANDS BUSINESS
(Certain Product Lines of International Home Foods, Inc.)
Notes to Combined Financial Statements
December 31, 1998 and 1997
(Dollars in Thousands)
fruit spreads, preserves and wet spices in the New York metropolitan
area. These contracts were terminated upon the consummation of the
Agreement on February 5, 1999.
(2) Summary of Significant Accounting Policies
(a) Revenue Recognition
Revenue from the sale of products is recognized at the time the
products are shipped. Direct revenue represents gross sales less
discounts, and other deductions.
(b) Use of Estimates
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
combined financial statements and accompanying disclosures. Actual
results could differ from these estimates. Also as discussed in note 1,
these combined financial statements include allocations and estimates
that are not necessarily indicative of the costs and expenses that
would have resulted if the Polaner Brands Business had been operated as
a separate entity, or the future results of the Polaner Brands
Business.
(c) Inventories
Raw materials and finished goods inventories are directly attributable
to the Polaner Brands Business. Inventories are priced at the lower of
cost, determined by the first-in, first-out method, or market.
(d) Machinery and Equipment
Machinery and equipment is stated at historical cost, net of
accumulated depreciation of $1,692 and $1,336 at December 31, 1998 and
1997, respectively. Alterations and major overhauls which extend the
lives or increase the capacity of the assets are capitalized. Ordinary
repairs and maintenance are charged to operating costs. Depreciation is
computed using the straight-line method over 15 years, the estimated
useful life of the assets.
(e) Direct Sales, Marketing and Distribution Expenses
Direct sales, marketing and distribution expenses represent
specifically identified consumer and trade promotional expenses,
advertising expenses, broker commissions and delivery and distribution
expenses. Also included in direct sales, marketing and distribution
expenses is allocations of selling and distribution costs such as field
sales force and
17
<PAGE>
THE POLANER BRANDS BUSINESS
(Certain Product Lines of International Home Foods, Inc.)
Notes to Combined Financial Statements
December 31, 1998 and 1997
(Dollars in Thousands)
warehousing based on relative sales of the Polaner Brands Business.
Such allocated expenses represent those charges that are attributable
to the Polaner Brands Business.
(f) Direct General and Administrative Expenses
Direct general and administrative expenses are allocated to the Polaner
Brands Business based on the relative sales of the Polaner Brands
Business. Such allocated expenses represent those charges that are
attributable to the Polaner Brands Business, and include expenses such
as human resources, finance, legal, insurance and other general and
administrative expenses. Certain other general and administrative
expenses that are not directly attributable or specifically
identifiable to the Polaner Brands Business such as general corporate
expenses have been excluded from direct general and administrative
expenses.
(3) Inventories
Inventories consist of the following at December 31:
1998 1997
------------------- -------------------
Raw materials $ 7,318 5,352
Finished goods 3,308 5,455
------------------- -------------------
$ 10,626 10,807
=================== ===================
(4) Commitments and Contingencies
From time to time, the Polaner Brands Business may be subjected to
certain lawsuits and claims, and other actions arising in the normal
course of business. As defined in the Agreement, all liabilities
arising out of, based upon, or resulting from any actions, suits,
claims or proceedings, pending or threatened, based upon any
transactions or occurrences or acts or omissions of the Seller or the
Polaner Brands Business on or prior to the closing date of the
acquisition, are the responsibility of the Seller.
18
<PAGE>
(b.) Pro forma Financial Information (Dollars in Thousands)
The following presents certain unaudited pro forma combined financial
information of B&G Foods, Inc. and subsidiaries (the "Company" or "B&G") as of
and for the year ended January 2, 1999. The unaudited pro forma combined
statement of operations data give effect to (i) the acquisition of certain
assets of the Polaner Brand and related brands (collectively, "Polaner," or the
"Polaner Acquisition") which was consummated on February 5, 1999, (ii) the
acquisition of the assets and stock of the Heritage Portfolio of Brands
("Heritage," or the "Heritage Acquisition"), which occurred on March 15, 1999,
and (iii) the related financings.
The pro forma combined operations data was prepared as if the Polaner
Acquisition and the Heritage Acquisition took place on January 1, 1998, and the
pro forma combined balance sheet data was prepared as if the acquisitions took
place on January 2, 1999. The financial statements give pro forma effect to (i)
borrowings and equity financing used to fund the acquisitions, and (ii)
preliminary allocation of the purchase price based upon the fair value of the
assets and liabilities acquired.
Since B&G also consummated the acquisition of Maple Grove on July 17, 1998, the
"B&G, As Adjusted" amounts included in the unaudited pro forma combined
operations data also reflects the acquisition of Maple Grove as if it took place
on January 1, 1998. Additional information on the Maple Grove Acquisition,
including pro forma information, is included in B&G's Form 8-K/A filed October
2, 1998.
On February 5, 1999, the Company acquired the assets of Polaner from
International Home Foods, Inc. ("IHF") for approximately $30,500 in cash,
including transaction costs. Financing for this acquisition and certain related
transaction fees and expenses was provided by borrowings from the Company's
Credit Facility.
On March 15, 1999, the Company acquired the assets and stock of Heritage for
$195,374 including transaction costs, from The Pillsbury Company. In connection
with this transaction, the Company entered into a $280,000 senior secured credit
facility comprised of a $60,000 five-year revolving credit facility, a $70,000
five-year term loan facility ("Term Loan A") and a $150,000 seven-year term loan
facility ("Term Loan B" and collectively with Term Loan A, the "Term Loan
Facilities"). The proceeds of the Term Loan Facilities, together with an
additional $35,000 of equity from Bruckman, Rosser, Sherrill and Co., L.P.
("BRS"), were used to fund the Heritage Acquisition and refinance borrowings
under the Company's Credit Facility.
The unaudited pro forma combined financial information set forth below reflects
pro forma adjustments that are based upon available information and certain
assumptions that the Company believes are reasonable. The unaudited pro forma
combined financial information does not purport to represent the Company's
results of operations or financial position that would have resulted had the
transactions to which pro forma effect is given been consummated as of the date
or for the period indicated. The Polaner Acquisition and the Heritage
Acquisition have been accounted for herein by the purchase method of accounting.
The pro forma information reflects preliminary estimates of the allocation of
the purchase price for the Polaner Acquisition and the Heritage Acquisition
which may be adjusted based upon a valuation study to be conducted. Management
does not expect such adjustments to be material.
19
<PAGE>
The unaudited pro forma combined financial statements and accompanying notes
should be read in conjunction with the historical financial statements of the
Company, Polaner and Heritage and with other information pertaining to the
Company in its Prospectus dated February 6, 1998.
20
<PAGE>
B&G Foods, Inc.
Unaudited Pro Forma Combined Balance Sheet
January 2, 1999
(Dollars in Thousands)
<TABLE>
<CAPTION>
Historical
------------------------------------------------------------------------------------------------
Pro Forma
B&G Polaner Heritage Pro Forma Consolidated
January 2, 1999 (1) December 31, 1998 (2) December 31, 1998 (3) Adjustments January 2, 1999
------------------- --------------------- --------------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 599 $ - $ - $ - $ 599
Trade accounts receivable, net 15,656 - - - 15,656
Inventories 39,764 10,626 19,599 479 (4) 70,468
Prepaid expenses and other current assets 1,646 - - - 1,646
Deferred income taxes 2,938 - - - 2,938
------------------ -------------------- ------------------- ---------- ---------------
Total current assets 60,603 10,626 19,599 479 91,307
================= ==================== =================== ========== ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Historical
-----------------------------------------------------------
Pro Forma
B&G Polaner Heritage Pro Forma Consolidated
January 2, 1999(1) December 31, 1998(2) December 31, 1998(3) Adjustments January 2, 1999
Assets
Cash and cash equivalents $ 599 $ - $ - $ - $ 599
Trade accounts receivable, net 15,656 - - - 15,656
Inventories 39,764 10,626 19,599 479 (4) 70,468
Prepaid expenses and other current assets 1,646 - - - 1,646
Deferred income taxes 2,938 - - - 2,938
------------------ -------------------- ------------------- ---------- ----------------
Total current assets 60,603 10,626 19,599 479 91,307
26,486 4,633 10,720 - 41,839
119,542 - - 194,556 (4) 314,098
5,242 - - 6,202 (5) 11,444
------------------ -------------------- ------------------- ---------- ----------------
TOTAL ASSETS $ 211,873 $ 15,259 $ 30,319 $ 201,237 $ 458,688
================== ==================== =================== ========== ================
Liabilities and Stockholder's Equity
Current installments of long-term debt $ 1,431 $ - $ - $ - $ 1,431
Trade accounts payable 17,508 - - - 17,508
Accrued expenses 10,335 33 - - 10,368
Due to related parties 705 - - - 705
------------------ -------------------- ------------------- ---------- ----------------
Total current liabilities 29,979 33 - - 30,012
143,265 - - 197,076 (6) 340,341
17,809 - - 14,706 (4) 32,515
------------------ -------------------- ------------------- ---------- ----------------
Total liabilities 191,053 33 - 211,782 402,868
Common stock - - - - -
Additional paid in capital 21,342 - - 35,000 (7) 56,342
Retained earnings (accumulated deficit) (522) 15,226 30,319 (45,545)(8) (522)
------------------ -------------------- ------------------- ---------- ----------------
Total stockholder's equity 20,820 15,226 30,319 (10,545) 55,820
------------------ -------------------- ------------------- ---------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 211,873 $ 15,259 $ 30,319 $ 201,237 $ 458,688
================== ==================== =================== ========== ================
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
21
<PAGE>
B&G Foods, Inc.
Unaudited Pro Forma Combined Statement of Operations
For the Fiscal Year Ended January 2, 1999
(Dollars in Thousands)
<TABLE>
<CAPTION>
Historical Maple Grove B&G, Historical Historical Pro Forma Pro Forma
B&G (9) Pro Forma (10) As Adjusted Polaner (11) Heritage (12) Adjustments Consolidated
---------- -------------- ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Net sales $179,780 $20,669 $200,449 $50,162 $134,233 $(36,906) (13) $347,938
Cost of goods sold 108,186 16,005 124,191 31,121 67,652 (45,392) (14) 177,572
-------- ------- -------- ------- -------- --------- --------
Gross profit 71,594 4,664 76,258 19,041 66,581 8,486 170,366
Sales, marketing and
distribution expenses 49,430 2,686 52,116 15,700 29,161 8,965 (15) 105,942
General and administrative 5,725 727 6,492 911 2,682 5,389 (16) 15,474
expenses
Management fees 250 - 250 - - - 250
-------- ------- -------- ------- -------- --------- --------
Operating income 16,189 1,211 17,400 2,430 34,738 (5,868) 48,700
Other (income) expense:
Interest expense -
related parties 74 - 74 - - (74) (17) -
Interest expense 13,834 450 14,234 - - 17,467 (18) 31,751
-------- ------- -------- ------- -------- --------- --------
Income before income
tax expense 2,281 761 3,042 2,430 34,738 (23,261) 16,494
Income tax expense 1,431 71 1,502 - - 6,693 (19) 8,195
-------- ------- -------- ------- -------- --------- --------
Net income $ 850 $ 690 $ 1,540 $ 2,430 $ 34,738 $(29,954) $ 8,754
======== ======= ======== ======= ======== ========= ========
(See accompanying notes to unaudited pro forma combined financial statements.)
</TABLE>
22
<PAGE>
B&G Foods, Inc.
Notes to Unaudited Pro Forma
Combined Financial Statements (Continued)
(Dollars in Thousands)
Balance Sheet
The unaudited pro forma combined financial statements have been
adjusted for the items set forth below.
1. Represents the Company's historical balance sheet as of January 2, 1999.
2. Represents the historical combined statement of net assets acquired of the
Polaner Brands Business as of December 31, 1998.
3. Represents the historical combined statement of assets expected to be sold
of the Heritage Brands Business as of December 31, 1998.
4. The following reflect the preliminary allocation of the purchase price to
the estimated fair value of the net assets acquired based upon available
information for the Polaner Acquisition and the Heritage Acquisition. These
allocations may change based on the results of appraisals and other
analyses.
<TABLE>
<CAPTION>
Heritage Polaner Total
<S> <C> <C> <C>
Purchase price, including transaction costs............... $ 195,374 $ 30,500 $ 225,874
Net assets acquired....................................... (30,319) (15,226) (45,545)
------------- ------------- -------------
Subtotal 165,055 15,274 180,329
------------ ------------- -------------
Fair value adjustments:
Inventory............................................ 409 70 479
Property, plant and equipment (a).................... - - -
Other intangible assets (trademarks)................. 95,000 12,000 107,000
Deferred tax liabilities............................. (14,706) - (14,706)
------------- ------------- -------------
Subtotal 80,703 12,070 92,773
------------- ------------- -------------
Excess of cost over fair value of net assets acquired
(goodwill)................................................ $ 84,352 $ 3,204 $ 87,556
=========== ========== ===========
(a) The estimated write-up to fair value from book value for
certain property, plant and equipment will approximate the
write down for certain other equipment from book value to a
zero value which will be assigned to equipment acquired that
will not be utilized in production.
5. Reflects deferred financing charges incurred in connection with the
$280,000 senior secured credit facility which will be amortized over
five and seven years, the respective terms of the related debt. $ 6,202
=======
</TABLE>
24
<PAGE>
B&G Foods, Inc.
Notes to Unaudited Pro Forma
Combined Financial Statements (Continued)
(Dollars in Thousands)
6. Reflects the borrowings to finance the Polaner Acquisition and the Heritage
Acquisition as follows:
25
<PAGE>
B&G Foods, Inc.
Notes to Unaudited Pro Forma
Combined Financial Statements (Continued)
(Dollars in Thousands)
<TABLE>
<CAPTION>
<S> <C>
Term Loan A $ 70,000
Term Loan B 150,000
----------
Total additional debt 220,000
Payoff of existing Credit Facility (no deferred
financing costs are recorded related to this facility) (22,924)
Total increase in long-term debt $ 197,076
7. Additional equity contributed by BRS for the Heritage Acquisition. $ 35,000
==========
8. Reflects the elimination of Polaner and Heritage historical
stockholders'equity as follows:
Polaner Acquisition $ (15,226)
Heritage Acquisition (30,319)
-----------
$ (45,545)
Statement of Operations
9. Represents B&G's historical results of operations for the fiscal year
ended January 2, 1999 which include the results of operations of Maple
Grove since its acquisition by B&G on July 17, 1998.
10. Represents pro forma adjustments related to the Maple Grove Acquisition
by B&G as if it occurred on January 1, 1998. The Maple Grove
Acquisition was accounted for using the purchase method.
Maple Grove's
Operating Results
Jan.1-July 17, 1998 Pro Forma Maple Grove
Historical Adjustments Pro Forma
------------------- ----------- ------------
Net sales $ 20,669 20,669
Cost of goods sold 16,005 16,005
Gross profit 4,664 4,664
Sales, marketing and distribution expenses 2,686 2,686
General and administrative expenses 568 199 (a) 767
---------- --- ------
Operating income 1,410 (199) 1,121
Interest expense - related parties 118 (118) (b) -
Interest expense 450 - 450
---------- --- ------
Income before income tax expense 842 (81) 761
Income tax expense 71 71
---------- --- ------
Net income $ 771 (81) 690
========== ==== ======
</TABLE>
(a) Adjustment to increase amortization expense of $257 for the
excess cost over fair value of net assets acquired (goodwill
amortized over 40 years) and other intangible assets
26
<PAGE>
B&G Foods, Inc.
Notes to Unaudited Pro Forma
Combined Financial Statements (Continued)
(Dollars in Thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(trademarks amortized over 33 years), and adjustment to
eliminate the salary of the majority stockholder and to record
the salary and consulting arrangement with the majority
stockholder pursuant to theMaple Grove Stock Purchas Agreement
dated July 2, 1998 (net decrease in expenses of $58).
(b) To eliminate interest expense with related party (stockholder).
11. Represents the historical results of operations for the Polaner Brands
Business for the year ended December 31, 1998.
12. Represents the historical results of operations for the Pillsbury Brands
Business for the year ended December 31, 1998.
13. Adjustment to eliminate B&G's sales to IHF for Polaner products under the
IHF contracts which were terminated upon acquisition. $ (36,906)
=========
14. Adjustment to eliminate B&G's cost of sales to IHF for Polaner products
under the IHF contracts which were terminated upon acquisition $ (36,906)
Reclassification of Heritage's distribution costs included in cost of
sales, to sales, marketing and distribution expeness to conform to B&G's
presentation (8,965)
Adjustment to reflect additional cost of goods sold resulting from the
allocation of the purchase price to inventories 479
----------
$ (45,392)
==========
15. Adjustment to reclassify Heritage's distribution costs included in cost of
sales, to sales, marketing and distribution expenses to conform to B&G's
presentation $ 8,965
========
16. Adjustment to amortization expense for the excess cost over fair value
of net assets acquired and other intangible assets. Excess cost over
fair value of net assets acquired (goodwill) and other intangible
assets (trademarks) are being amortized over 40, and 25-40 years,
respectively.
Polaner Acquisition $ 380
Heritage Acquisition 5,009
--------
$ 5,389
17. Adjustment to eliminate historical interest expense with related parties. $ (74)
=========
</TABLE>
27
<PAGE>
B&G Foods, Inc.
Notes to Unaudited Pro Forma
Combined Financial Statements (Continued)
(Dollars in Thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
18. Adjustment to eliminate the Company's historical interest expense and
to reflect the Company's pro forma interest expense associated with
additional borrowings for the acquisitions and amortization of deferred
debt issuance costs:
Historical interest expense $(14,284)
Other debt, including capital leases 138
Commitment fee on the aggregate unused portion of the
Credit Facility (0.60%) 360
$120,000 Senior Subordinates Notes (the Existing Notes) (9.625%) 11,550
$70,000 Term Loan A (8.125%) 5,688
$150,000 Term Loan B (8.25%) 12,375
---------
15,827
Amortization of deferred debt issuance costs. In connection with the issuance
of the Existing Notes ($120 million) and the Term Loan Facilities, the Company
incurred approximately $5.9 and $6.2 million, respectively, in deferred debt
issuance costs which are being amortized over the life of the Existing Notes (10
years) and Term Loan Facilities (5 and 7 years) 1,640
----------
$ 17,467
19. Adjustment to income tax expense to reflect the between the expense calculated
at the statutory rate (34%) and the amount reflected in the pro forma statements
is attributable primarily to non-deductible goodwill and state income taxes. $ 6,693
=========
The effects of a 1/8% increase or decrease in interest rates would
change interest expense by approximately $275.
</TABLE>
28
